<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
HOST FUNDING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
HOST FUNDING, INC.
6116 NORTH CENTRAL EXPRESSWAY
SUITE 1313
DALLAS, TEXAS 75206
---------------------
PROXY STATEMENT
This Proxy Statement and accompanying Proxy Card are being furnished by
the Board of Directors of Host Funding, Inc., a Maryland corporation (the
"Corporation"), in connection with the solicitation of proxies for use at the
Annual Meeting of Stockholders to be held in the Monterey Room of the
DoubleTree Hotel, Campbell Centre, 8250 North Central Expressway, Dallas,
Texas 75206, on Monday, June 7, 1999 at 10:00 a.m., Dallas time, and at any
adjournments thereof (the "Annual Meeting"). This Proxy Statement, with the
accompanying Proxy Card, is first being mailed to holders of the
Corporation's Class A Common Stock, $0.01 par value (the "Class A Common
Stock"), on or about April 30, 1999.
The purpose and business of the meeting is:
(1) To elect five (5) directors to serve until the next Annual Meeting of
Stockholders and until their successors are elected (Proposal 1);
(2) To authorize the designation and subsequent issuance of up to
5,000,000 shares of the Class A Cumulative Convertible Preferred
Stock, $ 0.01 par value (the "Class A Preferred Stock"), of the
Corporation (Proposal 2);
(3) To authorize the reservation and subsequent issuance of up to
4,000,000 shares of the authorized but unissued shares of Class A
Common Stock of the Corporation, which shares shall be issuable upon
conversion of membership units (the "Membership Units") in certain
operating companies to be formed by the Corporation and as further
described in this Proxy Statement (Proposal 3); and
(4) To transact such other business as may properly come before the Annual
Meeting and any adjournments thereof.
Only stockholders of record of Class A Common Stock at the close of
business on April 29, 1999, will be entitled to vote at the Annual Meeting.
As of the close of business on such date, there were outstanding and entitled
to vote 1,547,369 shares of Class A Common Stock. Each share of Class A
Common Stock is entitled to one vote. The presence in person or by proxy, of
the holders
<PAGE>
of a majority of the votes represented by the outstanding shares of Class A
Common Stock entitled to vote at the Annual Meeting is necessary to
constitute a quorum for the conduct of business at the Annual Meeting.
Shares held by persons who abstain from voting on a proposal will be counted
in determining whether a quorum is present, but will not be counted as voting
either for or against such proposal. If a broker indicates on the Proxy that
it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter. Assuming the presence of a
quorum, the affirmative vote of (i) the holders of a plurality of the shares
voting at the meeting is necessary for the election of directors (Proposal 1)
and (ii) the holders of a majority of the voting shares is necessary for the
designation and subsequent issuance of the Class A Preferred Stock (Proposal
2) and the reservation and subsequent issuance of shares of Class A Common
Stock upon conversion of the Membership Units (Proposal 3). An automated
system administered by the Corporation's transfer agent will tabulate the
votes.
Where a specific designation is given in the Proxy with respect to the
vote on the directors and Proposals 2 and 3, the Proxy will be voted in
accordance with such designation. If no such designation is made, the Proxy
will be voted FOR the nominees for directors named in this Proxy Statement
and in favor of Proposals 2 and 3. Any stockholder giving a Proxy may revoke
it at any time before it is voted at the Annual Meeting by delivering to the
Secretary of the Corporation a written notice of revocation or duly executed
Proxy bearing a later date or by appearing at the Annual Meeting and revoking
his or her Proxy and voting in person.
All of the directors, nominees for director and officers of the
Corporation have agreed to vote the Class A Common Stock held by such persons
in favor of Proposal 2 and Proposal 3. As of the date of this Proxy
Statement, such directors, nominees for director and officers owned or
controlled 656,370 shares, or 42.42%, of the Class A Common Stock of the
Corporation outstanding as of the date of this Proxy Statement. See
"Security Ownership of Certain Beneficial Owners and Management".
ELECTION OF DIRECTORS
(PROPOSAL 1)
Five directors are to be elected at the Annual Meeting to serve until
the next Annual Meeting of Stockholders and until their respective successors
are elected. Except where authority to vote for directors has been withheld,
it is intended that the proxies received pursuant to this solicitation will
be voted FOR the nominees named. If for any reason any such nominee is not
available for election, such proxies will be voted in favor of the remaining
named nominees and may be voted for substitute nominees in place of those who
are not candidates. Management, however, has no reason to expect that any of
the nominees will be unavailable for election. All nominees have agreed to
serve if elected.
The Bylaws of the Corporation provide that the Board of Directors shall
consist of not less than three and no more than fifteen members and that
vacancies on the Board of Directors and newly-created directorships may be
filled by a majority vote of the entire Board of Directors at any meeting. To
be elected a director, each nominee must receive a plurality of all votes
cast at the meeting for the election of directors.
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
EACH OF THE NOMINEES NAMED IN THIS PROXY STATEMENT.
Except for Messrs. Brian K. Rodgers and Robert E. Dixon, all nominees
for director have served as directors since the last Annual Meeting of
Stockholders held on July 16, 1998. The following information has been
furnished to the Corporation by the nominees for director and by the
non-director executive officers:
MICHAEL S. MCNULTY, DIRECTOR AND PRESIDENT
Michael S. McNulty, 51, received his Juris Doctorate from Southern
Methodist University in 1973. From 1977 to 1985, Mr. McNulty was employed by
the real estate development corporation of a multi-national family with
business interests in various countries. During that period, Mr. McNulty was
responsible for developing partnerships for investments in over thirty real
estate projects with gross investments exceeding $200,000,000. Prior to
election in September 1995 as President of the Corporation, Mr. McNulty owned
his own private financial consulting firm. Mr. McNulty is also President
and Director of a controlling venture in a Napa Valley based winery. In
addition, Mr. McNulty has served from 1994 to the present as the President
and a director of Blacor, Inc., the principal corporation of a group of
companies controlled by a multi-national investor, the primary purpose of
which is to invest in real property in the United States.
GUY E. HATFIELD, DIRECTOR
Guy E. Hatfield, 64, has been President of All American Group, Inc., a
Delaware corporation, since 1989. Mr. Hatfield earned a Bachelor of Science
degree from Bradley University in 1955 and a Juris Doctorate from the
University of San Diego in 1962. From 1984 to 1989, Mr. Hatfield was
Chairman of the Board and Chief Executive Officer of Motels of America, Inc.,
a corporation which built and managed 107 Super 8 motels and had gross annual
sales of $80,000,000. Since 1989, Mr. Hatfield has served as President and
Chairman of Hatfield Inns, Inc., a corporation involved in the ownership and
management of hotel properties.
BRIAN K. RODGERS, DIRECTOR
Brian K. Rodgers, 27, is an associate of HVS International, a worldwide
hotel consulting and appraisal firm serving hotel owners and lenders
throughout the United States and abroad. Mr. Rodgers has conducted
appraisals on hotel assets and development projects valued at over $1
billion. Prior to his employment at HVS International, Mr. Rodgers gained
operational experience at Four Seasons Hotels and Resorts, serving a
management role in the opening of the Four Seasons Resort Aviara, located in
Carlsbad, California. Mr. Rodgers earned a Bachelor of Arts degree in
psychology from the University of California at San Diego in 1994, and a
Master of Management in Hospitality degree from Cornell University in 1998.
Mr. Rodgers currently resides in San Francisco, California and is an active
member of the Cornell Hotel Society.
3
<PAGE>
WILLIAM M. BIRDSALL, DIRECTOR
William M. Birdsall, 50, was Chairman of the Board and Chief Executive
Officer of the Company until March 31, 1998. Effective April 1, 1998, Mr.
Birdsall resigned his position as Chairman of the Board and Chief Executive
Officer, but continues to serve as an independent director of the Company.
He also serves as President of Birdsall & Corporation, a real estate
investment and finance firm located in Durango, Colorado. Before starting
Birdsall & Corporation in 1993, Mr. Birdsall was Chairman and CEO of the
Price REIT, a public corporation which he co-founded and took public in 1991
in the form of a Real Estate Investment Trust trading on NASDAQ. Mr.
Birdsall has been involved with real estate development since 1978. He was
Chief Operating Officer of Estes Properties, Inc., where he was responsible
for operations of the Lowes Ventana Canyon Resort and Golf Club in Tucson,
Arizona, a 2,000-acre planned community and resort hotel. From 1982 through
1987 he was Senior Vice-President of Real Estate for Ramada, Inc., an
international hotel chain. He now serves on the Scripps Memorial Hospitals
Foundation Board and is a member of the Young Presidents Organization,
Arizona Bar Association, Urban Land Institute, and International Council of
Shopping Centers.
ROBERT E. DIXON, DIRECTOR
Robert E. Dixon, 28, is the managing member and controlling interest
holder in Sutter Capital Management, LLC. Mr. Dixon is a Canadian citizen
and received his bachelors degree from the University of California at Los
Angeles in 1992. During 1993 and 1994, Mr. Dixon was employed by Lehman
Brothers in equity sales and trading and in October, 1994 joined MacKenzie
Patterson, Inc., as a securities research analyst. In June, 1996, Mr. Dixon
left MacKenzie Patterson to begin buying and selling securities for his own
account and that of Sutter Opportunity Fund, an entity which he controls.
Mr. Dixon was a registered representative of North Coast Securities from 1994
through 1997.
BONA K. ALLEN, CHIEF FINANCIAL OFFICER
Bona K. Allen, 38, is the Chief Financial Officer and Secretary of the
Company, and has been involved in financial aspects of real estate
investment, development, management, and construction since graduating from
Birmingham-Southern College in 1982. Prior to appointment to the
Corporation, Mr. Allen served as a financial executive with The Myrick
Company (Atlanta, Georgia) and as a financial consultant from 1994 through
1996. From 1986 to 1994, Mr. Allen was employed by Wilma South Management
Corporation (and affiliates), the United States holding company of a Dutch
owned real estate group. Mr. Allen served in several positions with
increasing responsibility and was named Vice President/Chief Financial
Officer in 1991. He was responsible for the financial operations of the
Company at the time Wilma owned or controlled assets with a cost totaling in
excess of $500 million located in the Southwest, Southeast and Southern
California regions of the United States. Mr. Allen is a member of the
American Institute of Certified Accountants, the Georgia Society of Certified
Public Accountants, and the Alabama Society of Certified Public Accountants.
Mr. Allen was elected Chief Financial Officer of the Company effective
February 1, 1997.
4
<PAGE>
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
The Corporation does not have a nominating committee. Nominations for
directors and officers are considered by the entire Board of Directors. The
Corporation's Board of Directors has established Audit, Executive and
Compensation Committees. During 1998, there were twelve (12) meetings of the
Board of Directors and one (1) meetings of each of the Executive, Audit and
Compensation Committees. All directors attended at least seventy-five
percent (75%) of all meetings of the Board of Directors and each committee on
which each director served as a member. The principal duties and current
membership of the three standing committees are as follows:
AUDIT COMMITTEE. Recommends to the Board of Directors the appointment
of independent auditors; reviews annual financial reports to stockholders
prior to their publication; reviews with the independent public accountants
the plans and results of the audit engagement; approves professional services
provided by the independent public accountants; reviews the independence of
the independent public accountants; considers the range of audit and
non-audit fees; and reviews the adequacy of the Corporation's internal
accounting controller. Membership of the Audit Committee is comprised of
three non-employee independent directors. The members of the Audit Committee
are Don W. Cockroft, Charles R. Dunn and William M. Birdsall.
EXECUTIVE COMMITTEE. Except as restricted by applicable law, the
Executive Committee has all the powers of the Board of Directors between
meetings of the Board. Membership of the Executive Committee is comprised of
three directors. The members of the Executive Committee are William M.
Birdsall, Michael S. McNulty and Guy E. Hatfield.
COMPENSATION COMMITTEE. The duties of the Compensation Committee
include providing a general review of the Corporation's compensation and
benefit plans to insure that they meet the Corporation's objectives. In
addition, the Compensation Committee has the sole authority to administer and
grant awards under the 1997 Incentive Plan approved by the Board of Directors
of the Corporation and approved by the stockholders at the annual meeting of
the stockholders held on May 21, 1997. Membership of the Compensation
Committee is comprised of three non-employee directors. The members of the
Compensation Committee are Don W. Cockroft, Charles R. Dunn and Guy E.
Hatfield.
5
<PAGE>
COMPENSATION OF DIRECTORS
In 1996, each of Messrs. Cockroft, Birdsall, and Dunn purchased 10,000
shares of Class A Common Stock in the Corporation's initial public offering.
The purchase price for the Class A Common Stock was paid by the execution by
each director of a $100,000, non-recourse promissory note secured by the
purchased shares (the "Directors Notes"). In connection with the purchase of
the shares, the Corporation agreed to forgive the Directors Notes (i) in
increments of 18% of the principal amount per annum for each year the
director remains a director of the Corporation, and (ii) upon the death,
disability or resignation of the director (except for voluntary resignation
or failure to serve). Until the first quarter of 1998, the Corporation paid
the outside directors (Messrs. Cockroft, Dunn and Birdsall) a director's fee
of $1,500 for each meeting attended. The Corporation discontinued this
policy for the fiscal year 1998, and in the alternative, elected to forgive
quarterly interest payments on, and an additional 2% of the principal balance
of, the Directors Notes. The Corporation has not paid and does anticipate
paying directors for service on Committees. All of the directors of the
Corporation are entitled to participate in the Host Funding, Inc. 1997
Incentive Plan, however, no benefits have been issued under the 1997
Incentive Plan since the date of adoption.
EXECUTIVE COMPENSATION
The following table sets forth for the years presented, the compensation
paid to the executive officers of the Corporation serving during 1998:
<TABLE>
<CAPTION>
Name and Other
Principal Year Salary Bonus Annual
Position (1) ($) ($) Compensation
<S> <C> <C> <C> <C>
William M. Birdsall, 1998 $ 27,000 $20,000 (2)
Chairman 1997 $ 99,000 $21,000 (2)
of the Board
Michael S. McNulty, 1998 $108,000
President 1997 $ 99,000
Bona K. Allen, 1998 $ 84,375
Chief 1997 $ 65,625
Financial Offer
</TABLE>
(1) Each of Messrs. McNulty and Allen was employed during fiscal years
1997 and 1998 pursuant to an employment agreement with the Company.
Mr. Birdsall was employed during fiscal year 1997 pursuant to an
employment agreement with the Corporation, which was terminated on
January 1, 1998. See "Employment Agreements and Other Compensation
Arrangements" below.
6
<PAGE>
(2) Forgiveness of indebtedness on director promissory note. See
"Compensation of Directors" above.
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION ARRANGEMENTS
WILLIAM M. BIRDSALL
The Company's employment agreement with Mr. Birdsall dated February 1,
1997, provided for an initial three-year term through January 31, 2000, with
automatic renewal for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. On January 1, 1998 the employment
agreement with Mr. Birdsall was terminated and Mr. Birdsall resigned as
Chairman of the Board and Chief Executive Officer of the Company effective
April 1, 1998. Pursuant to such termination, the Company agreed to pay Mr.
Birdsall the sum of $4,500 per month for the period January 1, 1998 through
June 30, 1998. Mr. Birdsall continues to serve as an independent director of
the Company.
MICHAEL S. MCNULTY
The Company's employment agreement with Mr. McNulty dated February 1,
1997, provides for an initial three-year term through January 31, 2000, with
automatic renewal for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. The agreement vests Mr. McNulty with
full authority as President and Chief Operating Officer of the Company and
provides for an annual base salary of $108,000, subject to an annual increase
to (i) $150,000 if the assets of the Company exceed $150,000,000 and (ii)
$250,000 if the assets of the Company exceed $250,000,000. The agreement
also provides for payment of a performance bonus calculated pursuant to a
formula based on the financial results achieved by the Company during any
fiscal year. No employment bonuses were owed to Mr. McNulty for fiscal year
1998.
BONA K. ALLEN
The Company's employment agreement with Mr. Allen dated February 1,
1997, provides for an initial three-year term through January 31, 2000, with
automatic renewal for a period of one year on each anniversary date of
February 1 ("Anniversary Date") unless terminated for any reason by written
notice from either party given to the other at least one hundred twenty (120)
days prior to the next Anniversary Date or unless otherwise terminated
pursuant to the terms of the agreement. The agreement vests Mr. Allen with
full authority as Chief Financial Officer of the Company and provides for an
annual base salary of $75,000, subject to an annual increase to (i) $112,500
if the assets of the Company exceed $150,000,000, and (ii) $150,000 if the
assets of the Company exceed $250,000,000.
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<PAGE>
The agreement also provides for payment of a performance bonus calculated
pursuant to a formula based on the financial results achieved by the Company
during any fiscal year. No employment bonuses were owed to Mr. Allen for
fiscal year 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer or employee of the Corporation served as a member of the
Compensation Committee of the Corporation during 1998. During 1998,
membership of the Compensation Committee was comprised of Don W. Cockroft,
Charles R. Dunn, and Guy E. Hayfield, each of whom was a non-employee
director.
SECTION 16(a) COMPLIANCE
Section 16(a) of the Exchange Act requires the Corporation's officers
and directors, and persons who own more than 10 percent of a registered class
of the Corporation's equity securities, to file reports of ownership and
change in ownership with the Securities and Exchange Commission (the "SEC").
Officers, directors and greater than 10 percent stockholders are required by
SEC regulations to furnish the Corporation with copies of all Section 16(a)
forms they file. Based solely on its review of the copies of such forms
received by it, or written representation from certain reporting persons that
no Forms 3, 4 or 5 were required for those persons, the Corporation believes
that, from January 1, 1998 to December 31 ,1998, all filing requirements
applicable to its officers, directors, and greater than 10 percent beneficial
owners were timely met, excluding Mr. Guy E. Hatfield.
In August, 1998, the Company became aware that Mr. Hatfield, a director
of the Company, had filed certain forms with the SEC subsequent to the dates
such forms were due to be filed pursuant to SEC regulations. In August,
1998, Mr. Hatfield filed an Annual Statement of Changes in Beneficial
Ownership on Form 5 ("Form 5") disclosing certain transactions that occurred
in 1997. Such Form 5 was required to have been filed with the SEC on or
before February 14, 1998. Additionally, in August, 1998, Mr. Hatfield filed
a Statement of Changes in Beneficial Ownership on Form 4 which was required
to be filed with the SEC on or before May 10, 1998.
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee was responsible for developing the
Corporation's executive compensation policies and administrating compensation
plans during 1998. The objectives of the Corporation's executive compensation
program administered by the Compensation Committee are:
- Support the achievement of desired Corporation performance.
- Provide compensation that will attract and retain superior talent and
reward performance.
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- Ensure that there is appropriate linkage between executive compensation
and the enhancement of stockholder value.
The executive compensation program is also designed to provide an overall
level of compensation opportunity that is competitive with companies of
comparable size, capitalization and complexity. Actual compensation levels,
however, may be greater or less than average competitive levels based upon
annual and long-term Corporation performance and specific issues peculiar to
the Corporation, as well as individual performance. Executive compensation
is not necessarily determined by specific relationship to objective criteria
or benchmarks of corporate performance. For the fiscal year 1999, the
Compensation Committee will use its discretion to set executive compensation
at levels warranted in its judgment by corporate and individual performance.
Members of the Compensation Committee
Guy E. Hatfield
Don W. Cockroft
Charles R. Dunn
9
<PAGE>
CORPORATE PERFORMANCE
The following graph compares the change in the Corporation's shareholder
return on the Class A Common Stock for the period April 22, 1996 (the date
the Corporation's Class A Common Stock became publicly-traded) through
December 31, 1998, with the changes in the Standard & Poor's 500 Stock Index
(the "S&P 500 Index") and the National Association of Real Estate Investment
Trust Equity Index (the "NAREIT Equity Index") for the same period, assuming
a base investment of $100 in the Class A Common Stock in each index for
comparative purposes. Total return equals change in stock price plus
dividends paid, and assumes that all dividends are reinvested. During the
period presented, the Class A Common Stock was traded on the American Stock
Exchange under the symbol "HFD". The NAREIT Equity Index is published
monthly by the National Association of Real Estate Investment Trusts, Inc.
("NAREIT") in its publication, REITWATCH. The index is available to the
public upon request to NAREIT.
<TABLE>
<CAPTION>
4/22/96 6/30/96 9/30/96 12/31/96 03/31/97 06/30/97 09/30/97 12/31/97 03/31/98 06/30/98 09/30/98 12/31/98
------- ------- ------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HFD Stock $100.00 $ 85.00 $ 83.46 $ 79.32 $101.61 $ 99.96 $101.12 $ 76.39 $ 65.37 $ 52.88 $ 23.50 $ 26.44
S & P $100.00 $103.55 $106.12 $114.41 $117.47 $137.98 $148.32 $152.58 $177.34 $183.21 $164.98 $200.12
NAREIT Equity
Index $100.00 $103.35 $111.28 $132.26 $132.60 $140.15 $155.57 $157.20 $156.49 $149.24 $132.96 $127.73
</TABLE>
The foregoing price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to
the extent that the Corporation specifically incorporates this graph by
reference, and shall not otherwise be deemed filed under such Acts.
There can be no assurance that the Corporation's share performance will
continue into the
10
<PAGE>
future with the same or similar trends depicted in the graph above. The
Corporation does not make or endorse any predictions as to future share
performance.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the nominees for director or officers of the Corporation will
receive any substantial interest, direct or indirect, by security holdings or
otherwise, in any matter to be acted upon at the Annual Meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 27, 1999, the beneficial
ownership, as defined by regulations of the Securities and Exchange
Commission (the "Commission"), of the Class A Common Stock held by: (i) each
person or group of persons known to the Corporation to beneficially own more
than five percent (5%) of the outstanding shares of Class A Common Stock;
(ii) each director of the Corporation; (iii) each current executive officer
of the Corporation named in the preceding Executive Compensation Table; and
(iv) all directors and executive officers as a group. The number of shares
and percentage ownership of Class A Common Stock for each person assumes that
shares of Class A Common Stock issuable upon exercise of stock warrants to
such person (exclusive of others) and exercisable within sixty (60) days from
April 27, 1999, are outstanding. Said information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF OWNERSHIP
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) PERCENT
-------------------- ------------------------ ---------
<S> <C> <C>
Guy E. Hatfield 371,643 (3) 24.02%
Ian Gardner-Smith 114,370 (4) 6.93%
Robert E. Dixon 227,318 (5) 14.69%
Michael S. McNulty 49,528 (4) (6) 3.15%
William M. Birdsall 10,000 *
Don W. Cockroft 10,000 *
Charles R. Dunn 10,000 *
Bona K. Allen 1,800 *
All Directors and Officers
of the Company as a
Group (eight persons,
including those named above) 680,289 43.29%
</TABLE>
* Less than one percent.
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(1) The addresses of the more than five percent (5%) holders listed in
the table are as follows: Guy E. Hatfield, 258 Coast Boulevard,
La Jolla, California 92037; Ian Gardner-Smith, 1025 Prospect Street,
Suite 350, La Jolla, California 92037; and Robert E. Dixon, 1640
School Street, Moraga, California 94556.
(2) A person is considered to "beneficially own" the shares over which
such person holds or shares voting power or investment power or over
which such person can acquire such power within sixty (60) days (for
example, through the exercise of stock options, stock warrants or
conversion of securities). Except as otherwise noted, each director
and officer has sole voting and investment power with respect to the
shares of Class A Common Stock of the Corporation.
(3) Includes 1,106 shares held in an Individual Retirement Account
with Sunwest Federal Credit Union for the benefit of Mr. Hatfield's
wife, Dorothy Hatfield; 1,574 shares held in an Individual
Retirement Account with Sunwest Federal Credit Union for the
benefit of Mr. Hatfield; 425 shares held in trust by Mr. Hatfield,
as trustee, for the benefit of Mr. Hatfield and his wife; 240,000
shares held in the Hatfield Family Trust; 340 shares held by
Sunwest Federal Credit Union for the benefit of Mr. Hatfield's son,
Scott J. Hatfield; and 340 shares held in the name of Scott J.
Hatfield, of which Mr. Hatfield may be deemed the beneficial owner.
(4) Includes shares of Class A Common Stock which may be acquired within
sixty (60) days of April 27, 1999 pursuant to the exercise of stock
warrants as follows: Ian Gardner-Smith 102,908 shares; and Donegal
Partners, Ltd., a family limited partnership of which Mr. McNulty acts
as general partner, 11,959. Also includes 11,960 shares issuable upon
exercise of stock warrants to Blacor, Inc., of which Mr. McNulty is
president and a director, and of which, Mr. McNulty disclaims
beneficial ownership.
(5) Represents 227,318 shares of Class A Common Stock owned by Sutter
Opportunity Fund, LLC, of which Mr. Dixon is the managing member and
controlling interest holder. Mr. Dixon is a nominee for director.
(6) Includes 5,781 shares of Class A Common Stock owned by Donegal
Partners, Ltd., a family partnership, of which Mr. McNulty acts as
general partner, 18,297 shares of Class A Common Stock owned by
Blacor, Inc., of which Mr. McNulty serves as president and a director,
845 shares owned by MGB Partnership, and 686 shares owned by MSM
Consulting, Inc., of which Mr. McNulty serves as president. Mr.
McNulty disclaims beneficial ownership of Class A Common Stock held by
Blacor, Inc. and MGB Partnership. In January, 1999, Mr. McNulty
transferred 4,738 of the shares owned by Donegal to Blacor in exchange
for cash and repayment of debt owed from Donegal to Blacor.
12
<PAGE>
PROPOSAL TO DESIGNATE AND AUTHORIZE THE ISSUANCE OF UP TO 5,000,000
SHARES OF CLASS A PREFERRED STOCK
(PROPOSAL 2)
The Corporation is requesting authority to designate and authorize the
issuance of up to 5,000,000 shares of a new series of cumulative convertible
preferred stock of the Corporation. The Corporation proposes to issue the
preferred stock as partial consideration for future hotel and motel
acquisitions by the Corporation or its subsidiaries or affiliates. The shares
of convertible preferred stock will be designated Class A Cumulative
Convertible Preferred Stock (the "Class A Preferred Stock"), with a par value
of $0.01 per share. The Class A Preferred Stock will be convertible into the
Class A Common Stock of the Corporation and will have dividend and
liquidation preferences over the holders of Class A Common Stock of the
Corporation. Each share of Class A Preferred Stock will be entitled to one
vote per share. See "Description of Class A Preferred Stock" for a more
detailed description of the terms of the Class A Preferred Stock. The
Corporation anticipates issuing the Class A Preferred Stock in the near
future, however, additional terms of the Class A Preferred Stock have not yet
been determined, and will be set forth by the Corporation's Board of
Directors as the Board evaluates each potential property acquisition. The
Articles of Incorporation of the Corporation deny preemptive rights to
existing stockholders upon issuance of the Class A Preferred Stock. The
Corporation will not solicit any further authorization from the stockholders
of the Corporation prior to the issuance of Class A Common Stock upon
conversion of shares of Class A Preferred Stock.
DESCRIPTION OF CLASS A PREFERRED STOCK
The Corporation is requesting authority to designate and authorize the
issuance of up to 5,000,000 shares of Class A Preferred Stock. Although the
terms of the Class A Preferred Stock have not been finally established, the
paragraphs set forth below describe the anticipated terms of the Class A
Preferred Stock as discussed and approved by the Board of Directors. The
actual terms of the Class A Preferred Stock may actually be more or less
beneficial to the current stockholders of the Corporation than the terms
described below. The Corporation's Board of Directors will determine
dividend rates, conversion prices, voting rights, redemption prices, maturity
dates and similar matters based upon the circumstances relating to each
potential property acquisition utilizing the Class A Preferred Stock,
including, without limitation, requiring the attainment of certain minimum
cash flow thresholds on acquired hotel properties prior to conversion. The
Board of Directors proposes that the Class A Preferred Stock would:
* Be entitled to a cumulative preferred dividend over the holders of Class A
Common Stock of the Corporation. The Board of Directors anticipates
setting the dividend on the Class A Preferred Stock to achieve a 12% yield.
* Be entitled to a liquidation preference over the holders of Class A Common
Stock of the Corporation.
* Be convertible, at the option of the holder of Class A Preferred Stock,
into Class A Common Stock of the Corporation at a strike price of not less
than $4.00 per share (subject to certain
13
<PAGE>
reset provisions which will provide that in no event shall the per share
price be less than the book value per share of the Class A Common Stock).
The minimum holding period for conversion of the Class A Preferred Stock
will be eighteen (18) months from the date of issuance.
* Be entitled to one vote per share.
The issuance of the Class A Common Stock upon conversion of the Class A
Preferred Stock may be dilutive to existing stockholders if the per share
conversion price of the Class A Preferred Stock at the time of conversion is
less than the book value of the Class A Common Stock. Although the initial
conversion price established by the Board of Directors may be greater or less
than book value, the terms of the Class A Preferred Stock will provide that
in no event will the actual conversion price be less than book value.
Therefore, the issuance of shares of Class A Common upon conversion of Class
A Preferred Stock should not have a dilutive effect on existing stockholders
at the time of conversion. The shares of Class A Common issued upon
conversion of Class A Preferred Stock will be deemed restricted securities
and subject to the limitations on resale set forth in the Securities Act of
1933.
TRANSACTIONS IN WHICH THE CLASS A PREFERRED STOCK MAY BE ISSUED
The Corporation anticipates issuing the Class A Preferred Stock in
partial consideration for (i) direct acquisitions of hotel and motel
properties by the Corporation and (ii) property acquisitions structured as
sale/leaseback transactions in which the Corporation receives Class II Units
of Host Mortgage Company, LLC ("HMC") in exchange for the Corporation's
interest in certain acquired properties. Proposal 3 of this Proxy Statement
contains a detailed description of HMC and the Class II Units, including a
Pro Forma Analysis of a typical hotel transaction utilizing the Class A
Preferred Stock. The Corporation is in the business of acquiring high quality
limited and full service properties in secondary and tertiary markets. The
Corporation believes that, by issuing Class A Preferred Stock, the
Corporation will be able to purchase such properties on more favorable terms
than exist in the current market place. The shares of Class A Preferred
Stock issued by the Corporation will be deemed restricted securities and
subject to the limitations on resale set forth in the Securities Act of 1933.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER BY THE CORPORATION TO
SELL SHARES OF CLASS A PREFERRED STOCK OF THE CORPORATION. SUCH AN OFFER, IF
AND WHEN MADE, WILL BE FULLY DESCRIBED IN AN OFFERING CIRCULAR TO EACH
POTENTIAL PURCHASER OF CLASS A PREFERRED STOCK. THERE CAN BE NO ASSURANCE,
HOWEVER, THAT SUCH AN OFFER WILL BE MADE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF PROPOSAL 2.
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<PAGE>
PROPOSAL TO RESERVE AND AUTHORIZE THE ISSUANCE OF UP TO 5,000,000
SHARES OF CLASS A COMMON STOCK UPON CONVERSION OF
MEMBERSHIP UNITS
(PROPOSAL 3)
On April 29, 1999, the Corporation formed Host Mortgage Company, LLC, a
Delaware limited liability company ("HMC"). The capital structure of HMC
consists of up to 1,667,000 Class I Units, $1.00 par value per Unit (the
"Class I Units"), and up to 2,650,000 Class II Units, $4.00 par value per
Unit (the "Class II Units"). The initial business purpose of HMC will be to
enable the Corporation to implement an acquisition program pursuant to which
HMC will acquire hotel properties structured as "sale/leaseback transactions"
through the formation of lower tier operating companies of which HMC will be
a minority member. In most cases, the seller of the hotel properties will
own a majority of the operating company in the form of operating membership
units convertible into Class A Common Stock (the "Convertible Membership
Units"). The Convertible Membership Units will be issued to the seller in
partial consideration of the purchase price of the acquired properties. See
"Transactions in Which Convertible Membership Units May Be Issued" below.
The Corporation proposes to contribute $667,000 in cash and promissory
notes to HMC in return for 667,000 Class I Units. The Board of Directors
of the Corporation does not anticipate any further significant contributions
relating to the acquisition of Class I Units in the immediate future. The
Corporation also proposes that the remaining Class I Units (up to 1,000,000)
will include a conversion feature and be sold to an outside investor or
investors in the form of a private placement offering. Assuming the issuance
of a maximum of 1,000,000 Class I Units, the Class I Units issued to the
outside investor or investors will be convertible after a period of four
years into a maximum of 333,333 shares of the Class A Common Stock of the
Corporation. The Class I Units owned by the Corporation will not be
convertible into Class A Common Stock.
The Class II Units will be reserved for issuance to the Corporation
based upon (i) additional contributions made by the Corporation to HMC in the
form of cash, notes or other property and (ii) transactions in which the
Corporation issues shares of Class A Preferred Stock as partial consideration
for the purchase price of properties acquired by the Corporation which are
subsequently contributed to HMC in return for Class II Units. See Proposal 2
of this Proxy Statement for a detailed description of the Class A Preferred
Stock. Although the terms of the Class II Units have not been fully
established, the anticipated material terms approved by the Board of
Directors include (i) a preference over distributions to the Class I Units
with appropriate distinctions for distributions of operating cash flow and
capital, (ii) voting rights on a one-for-one basis with the Class I Units,
and (iii) a cumulative distribution of 11% payable quarterly in arrears. The
Class II Units owned by the Corporation will not be convertible into Class A
Common Stock.
The Articles of Incorporation of the Corporation deny preemptive rights
to existing stockholders upon issuance of Class A Common Stock in conversion
of the Class I Units or Convertible Membership Units. The Corporation will
not solicit any further authorization form the stockholders prior to the
issuance of Class A Common Stock upon conversion of Class I Units or
Convertible Membership Units.
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<PAGE>
TRANSACTIONS IN WHICH CONVERTIBLE MEMBERSHIP UNITS MAY BE ISSUED
HMC will focus on the acquisition of hotel properties through two types
of sale/leaseback transactions (the "SLB Transactions") which will involve
either (i) a purchase by HMC coupled with a capital lease (a "Capital Lease")
with the seller or its affiliate, as lessee, or (ii) a purchase by HMC
coupled with an operating lease (an "Operating Lease") with the seller or its
affiliate, as lessee. The property valuation and general lease terms will
not vary whether the SLB Transaction involves a Capital Lease or an Operating
Lease. In addition, each SLB Transaction will allow the lessee the right to
reacquire the subject property throughout the lease term. The reacquisition
price under a Capital Lease will be equal to the original acquisition price,
plus franchise fees and property improvement plans (if any), less
amortization of base rents, times one hundred three percent (103%). The
reacquisition price under an Operating Lease will generally be equal to the
original acquisition price without reduction for amortization of base rents.
HMC will seek to acquire assets with demonstrated cash flows reflecting
a yield in excess of twelve percent (12%) and in which HMC will benefit from
a significant arbitrage (whereby rental income paid to HMC on a specific
property exceeds the debt service on such property) through the use of debt
with low interest rates. The acquisition focus will be on limited-service
hotels in markets where there is not a significant excess of supply or
proposed new construction. In addition, HMC will consider acquiring
franchised, full service hotel properties in secondary and tertiary markets
if the specific hotel is a dominant property in that particular market.
HMC will implement the SLB Transactions by purchasing hotel properties
through the formation of lower tier operating companies in which HMC will own
a minority of the membership units. Each operating company will then lease
the acquired hotel properties back to the seller or its affiliate pursuant to
either a Capital Lease or an Operating Lease. The lessee will manage and
operate the hotel properties and pay monthly base rent and quarterly
percentage rent to the operating company. The operating company will make
distributions to the holders of the Class I Units and Class II Units of HMC
based upon such rental payments. In most cases, the seller of the properties
will own a majority of the operating company in the form of Convertible
Membership Units. The owners of the Convertible Membership Units will have
certain rights to convert such units into shares of Class A Common Stock.
Conversion rights will be negotiated on a transaction by transaction basis
with the limitation that the conversion price of the Convertible Membership
Units cannot be less than the book value per share of the Class A Common
Stock on the date of conversion. The Corporation will also retain the option
to purchase the Convertible Membership Units at a predetermined price in lieu
of converting such units into Class A Common Stock. The minimum holding
period for conversion of the Convertible Membership Units units will be
eighteen (18) months from the date of issuance of such units. In the event
Convertible Membership Units are converted by a holder, the Corporation will
be entitled to all distributions related to such converted units.
The issuance of Class A Common Stock upon conversion of the Class I
Units or the Convertible Membership Units may be dilutive to existing
stockholders at the time of conversion. The Corporation, however, cannot
forecast the potential dilution associated with such conversions. A
16
<PAGE>
number of factors will affect the potential dilution of existing stockholders
attributable to future conversions, including, but not limited to, (i) time
of conversion, (ii) payments of dividends on Class A Common Stock, (iii)
previous distributions associated with Convertible Membership Units, and (iv)
the market value of the Class A Common Stock at the time of conversion. The
shares of Class A Common Stock issued upon conversion of the Class I Units or
Convertible Membership Units will be deemed restricted securities and subject
to the limitations on resale set forth in the Securities Act of 1933.
The following table reflects a pro forma analysis for the initial year
of a typical SLB Transaction of the type anticipated by the Corporation and
HMC utilizing either Class A Preferred Stock or Convertible Membership Units
and assuming (i) a purchase price of $10,000,000 and (ii) gross revenues of
$3,300,000. The actual financial results and benefits to the Corporation and
HMC may differ, perhaps significantly, from the following pro forma analysis
based on a variety of factors, including, changes in property values,
operating results and financial market conditions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL
OF PROPOSAL 3
17
<PAGE>
PROFORMA ANALYSIS OF A TYPICAL HOTEL TRANSACTION
Class A Preferred Stock or Convertible Membership Units
Initial Year of Sale/Lease Back Transaction
<TABLE>
<CAPTION>
Class A Preferred Membership Units
<S> <C> <C>
PURCHASE OF HOTEL PROPERTY
Purchase Price $10,000,000 $10,000,000
----------- -----------
----------- -----------
CONSIDERATION PAID AT CLOSING OF HOTEL PURCHASE:
Cash to Seller/Lessee $ 8,000,000 $ 8,000,000
Host Class A Preferred Stock 1,000,000
Convertible Membership Units 1,000,000
Security Deposit from Seller/Lessee 1,000,000 1,000,000
----------- -----------
Total Consideration $10,000,000 $10,000,000
----------- -----------
----------- -----------
BASE AND PERCENTAGE RENT PAID FROM SELLER/LESSEE TO OPERATING COMPANY/LESSOR
Percentage Rent $ 110,000 $ 110,000
Base Rent 890,000 890,000
----------- -----------
Total Rent Due from Lessee
to Operating Company $ 1,000,000 $ 1,000,000
----------- -----------
----------- -----------
CALCULATION OF DISTRIBUTIONS FROM OPERATING COMPANY
Total Rent Paid from Lessee to Operating
Company $ 1,000,000 $ 1,000,000
Debt Service on First Lien Debt (1) (760,000) (760,000)
----------- -----------
Cash Flow Before Administrative Fee
and Distributions $ 240,000 $ 240,000
----------- -----------
----------- -----------
Administrative Fee to Host Funding, Inc. (20,000) (20,000)
Distribution to Class A Preferred Stock (2) (110,000)
-----------
Distribution to Convertible Membership Units (2) (110,000)
-----------
Cash Available for Distribution
from Operating Company (3) $ 110,000 $ 110,000
----------- -----------
----------- -----------
</TABLE>
- ---------------------------------------
(1) Annual Interest of 8%, annual constant of 9.5%
(2) 11% return, payable to the extent percentage rent is paid under lease
agreement.
(3) Cash will first be distributed to HMC, then to the Corporation in
payment of the Corporation's preferred return on the Class II Units of
HMC owned by the Corporation. The estimated distributions to the
Corporation will be between 30% and 50% of the total cash available
for distribution from the operating company.
18
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF 1995
Certain statements in this Proxy Statement constitute "forward-looking
statements" as that term is defined under the Private Securities Litigation
Act of 1995 (the "Act"). The words "believe", "expect", "anticipate",
"intend" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements and to note that they speak only
as of the date hereof. Although forward-looking statements reflect
management's good faith beliefs, reliance should not be placed on
forward-looking statements because they involve known and unknown risks,
uncertainties and other factors, which may cause the actual results,
performance or achievements of the Corporation to differ materially from
anticipated future results, performance or achievements expressed or implied
by such forward-looking statements. The Corporation undertakes no
obligation to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise. Certain
factors that might cause a difference in actual results include, but are not
limited to, the Corporation's ability to locate and acquire hotel properties
on economically suitable terms and conditions; the Corporation's dependence
upon rental payments from the lessee's of the Corporation's hotel properties
for all of the Corporation's income; the Corporation's dependence upon the
abilities of the lessee's of the Corporation's hotel properties to manage the
hotel properties; risks associated with the hotel industry and real estate
markets in general; and risks associated with debt financing and its
availability.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Representatives of Price Waterhouse Coopers, L.L.P, the independent
accounting firm that audited the consolidated financial statements of the
Corporation for the fiscal year ended December 31, 1998, are expected to be
available at the Annual Meeting with the opportunity to make a statement if
they desire to do so and to answer questions. The Board of Directors, on
recommendation of the Audit Committee, has selected the firm of Price
Waterhouse Coopers, L.L.P as the Corporation's independent accountants for
the year ending December 31, 1999.
STOCKHOLDER PROPOSALS
Any stockholder proposal to be presented for action at the next meeting
of stockholders pursuant to the provisions of Rule 14a-8, under the
Securities Exchange Act of 1934, must be received at the Corporation's
principal executive offices no later than January 15, 2000, for inclusion in
the proxy statement and form of proxy relating to the 2000 Annual Meeting.
19
<PAGE>
MISCELLANEOUS
The Board of Directors knows of no other matters which are likely to
come before the Annual Meeting. If any other matters should properly come
before the Annual Meeting, it is the intention of the persons named in the
accompanying form of Proxy to vote on such matters in accordance with their
best judgment.
The solicitation of proxies is made on behalf of the Board of Directors
of the Corporation, and the cost thereof will be borne by the Corporation.
The Corporation will also reimburse brokerage firms and nominees for their
expenses in forwarding proxy material to beneficial owners of the Class A
Common Stock of the Corporation. In addition, officers and employees of the
Corporation (none of whom will receive any compensation therefore in addition
to their regular compensation) may solicit proxies. The solicitation will be
made by mail and, in addition, may be made by facsimile transmission,
telexes, personal interviews, or telephone.
ANNUAL REPORT
The Corporation's Annual Report to Stockholders for the fiscal year
ended December 31, 1998, is being sent to each stockholder with this Proxy
Statement. The Corporation's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (the "1998 Form 10-K") previously filed with the
Securities and Exchange Commission is incorporated herein by reference. The
Corporation will provide, without charge, a copy of the 1998 Form 10-K, upon
written request, directed to: Host Funding, Inc., 6116 North Central
Expressway, Suite 1313, Dallas, Texas 75206 Attention: Bona K. Allen,
Secretary.
PLEASE SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY
By Order of the Board of Directors
Michael S. McNulty,
President
DATED: April 30, 1999
Dallas, Texas
20
<PAGE>
HOST FUNDING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby (1) acknowledges receipt of the Notice of Annual
Meeting of Stockholders of Host Funding, Inc. (the "Company") to be held in
the Monterey Room of the Doubletree Hotel at Campbell Centre, 8250 North
Central Expressway, Dallas, Texas on Monday, June 7, 1999, at 10:00 AM Dallas
time, and the Proxy Statement in connection therewith; and (2) appoints Bona
K. Allen and John G. Rebensdorf, and each of them, for and in the name, place
and stead of the undersigned to vote upon and act with respect to all of the
shares of capital stock of the Company standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and
act, at the meeting and at any adjournment thereof, and the undersigned
directs that this proxy be voted as follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
HOST FUNDING, INC.
JUNE 7, 1999
* PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED *
___
/X/ PLEASE MARK YOUR | |
VOTES AS IN THIS ---
EXAMPLE USING
DARK INK ONLY.
<TABLE>
<S> <C> <C> <C>
FOR all nominees WITHHOLD
listed at right (except AUTHORITY to vote
as marked to the for all nominees listed
contrary below) at right
a) Election of / / / / NOMINEES: Guy E. Hatfield
Officers. Michael S. McNulty
William M. Birdsall
Robert E. Dixon
Brian K. Rodgers
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- ---------------------------------------------------------------
FOR AGAINST ABSTAIN
b) Designation and authorization of the / / / / / /
issuance of up to 5,000,000 shares of
Class A Preferred Stock.
FOR AGAINST ABSTAIN
c) Reservation and authorization of the / / / / / /
issuance of up to 4,000,000 shares of
Class A Common Stock upon conversion
of Membership Units.
d) In the discretion of the proxies on any other matter that may properly
come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
The undersigned hereby revokes any proxy or proxies heretofore given to
vote upon or act with respect to such stock and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them, may lawfully do by
virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Signature: Signature (if held jointly): Date:
---------------------------- ------------------------------ ----------------
NOTE: Please date this proxy and sign your name exactly as it appears herein. When there is more than one owner, each
should sign. When signing as an attorney, administrator, executor, guardian or trustee, please add your title as
such. If executed by a corporation, the proxy should be signed by a duly authorized officer. Please date, sign
and mail this proxy card in the enclosed envelope. No postage is required.
</TABLE>
